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Sender Name:
Town of Chevy Chase
Sent By:
(Automatically Sent By Website)
Send Date:
11/19/2015 2:15:15 PM
Email Subject:
Revenue Working Group Update

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I wanted to provide Town residents with an important update on the efforts of the Town’s Revenue Working Group. Over the last six months, the volunteers in the group have been analyzing data on Town tax returns and the way payments are structured by the State to try to help Town staff and the Council better forecast and understand our annual revenue stream. I believe that work has paid off for the Town.

The core of the group's original mandate was to understand what caused the significant decline - more than $1 million - in the Town's revenue in Fiscal Year 2015 (July 2014-June 2015). We have that answer. Town revenue fell for two reasons. First, the actual tax payments made by Town residents and owed to the Town fell by $500,000. Second, FY14 benefited from 'catch-up payments' as tax year revenues exceeded the State's estimates as revenue collections were occurring. That estimate is simply a formula based on the most recent tax year's collections, so this will hold true whenever tax payments increase from the prior year, which they did in Tax Year 2014. Using our new knowledge of how these payments are calculated, we'll be able to decrease our margin of error in forecasting Town revenue going forward. Tax revenues are inherently uncertain in any given year, especially in a smaller municipality, but reducing that margin of error is important.

As important as the above, though, is that in learning the nuances of how the Town is allocated revenue, the group identified an anomaly in the tax figures provided by the State. In 2010, the number of tax returns allocated to the Town increased to 2,898 from 1,946 in the prior year and 1,743 in the year before that. Concurrently, tax year revenues to the Town grew by 65%. The number of tax returns has remained relatively stable since then while tax year revenues have varied between $3.0m and $3.5m. The increase is believed to be concurrent with a new geo-mapping system put in place by the State to map tax returns more accurately to their resident jurisdiction.

The anomaly is that the number of tax returns is near to or greater than the number of residents in the Town depending on the year - and multiple Town residents likely fall under a single return for tax purposes. Over the last several weeks, Town staff have been in touch with the State in regards to this anomaly to answer important questions raised by the Town. Unfortunately, I believe that the outcome of this discussion will not be positive for the Town. The Town may have received tax payments owed to other jurisdictions due to errors at the State level that went undetected. We are dependent on the State for exact details of any resolution and have been promised those details in the near future. As Mayor, I wanted to make sure you are aware of this issue and to assure you that we will communicate full details as soon as we have them.

In closing, it is important to note that I, with Fred Cecere, Treasurer, requested the LRP to take on mission based budgeting, which they began during their November meeting. This is important because how we allocate the funds will need to be on a priorities, mission-based basis. As this moves forward residents will be requested to provide input and comments.

The Council will take on both the revenue issues described above and mission based budgeting.

Al Lang
Mayor


Plain text message

I wanted to provide Town residents with an important update on the efforts of the Town’s Revenue Working Group. Over the last six months, the volunteers in the group have been analyzing data on Town tax returns and the way payments are structured by the State to try to help Town staff and the Council better forecast and understand our annual revenue stream. I believe that work has paid off for the Town.

The core of the group's original mandate was to understand what caused the significant decline - more than $1 million - in the Town's revenue in Fiscal Year 2015 (July 2014-June 2015). We have that answer. Town revenue fell for two reasons. First, the actual tax payments made by Town residents and owed to the Town fell by $500,000. Second, FY14 benefited from 'catch-up payments' as tax year revenues exceeded the State's estimates as revenue collections were occurring. That estimate is simply a formula based on the most recent tax year's collections, so this will hold true whenever tax payments increase from the prior year, which they did in Tax Year 2014. Using our new knowledge of how these payments are calculated, we'll be able to decrease our margin of error in forecasting Town revenue going forward. Tax revenues are inherently uncertain in any given year, especially in a smaller municipality, but reducing that margin of error is important.

As important as the above, though, is that in learning the nuances of how the Town is allocated revenue, the group identified an anomaly in the tax figures provided by the State. In 2010, the number of tax returns allocated to the Town increased to 2,898 from 1,946 in the prior year and 1,743 in the year before that. Concurrently, tax year revenues to the Town grew by 65%. The number of tax returns has remained relatively stable since then while tax year revenues have varied between $3.0m and $3.5m. The increase is believed to be concurrent with a new geo-mapping system put in place by the State to map tax returns more accurately to their resident jurisdiction.

The anomaly is that the number of tax returns is near to or greater than the number of residents in the Town depending on the year - and multiple Town residents likely fall under a single return for tax purposes. Over the last several weeks, Town staff have been in touch with the State in regards to this anomaly to answer important questions raised by the Town. Unfortunately, I believe that the outcome of this discussion will not be positive for the Town. The Town may have received tax payments owed to other jurisdictions due to errors at the State level that went undetected. We are dependent on the State for exact details of any resolution and have been promised those details in the near future. As Mayor, I wanted to make sure you are aware of this issue and to assure you that we will communicate full details as soon as we have them.

In closing, it is important to note that I, with Fred Cecere, Treasurer, requested the LRP to take on mission based budgeting, which they began during their November meeting. This is important because how we allocate the funds will need to be on a priorities, mission-based basis. As this moves forward residents will be requested to provide input and comments.

The Council will take on both the revenue issues described above and mission based budgeting.

Al Lang
Mayor

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